Speaking at the FAAA Congress in Perth last week, Australian Financial Complaints Authority (AFCA) lead ombudsman, investments and advice, Shail Singh, revealed that Shield and First Guardian investors had lodged a total of 1,559 complaints as of 10 November.
While Financial Advice Association Australia (FAAA) general manager policy, advocacy and standards Phil Anderson described this as a “very big number”, Singh responded that given there are around 12,000 people affected it could end up being much higher as the process goes forward.
Looking at why there haven’t been more complaints, particularly as the collapses have been so widely publicised, he said there is a concern that investors “don’t know who to complain against”.
“The whole process is quite overwhelming for them,” Singh added.
According to AFCA, while the vast majority of complaints have been against the financial advisers involved in recommending the investments, around 24 per cent relate to the super products – which presents a complication for the complaints authority.
“At this jurisdiction, we’re not allowed to consider certain things. So for example, investment performance is not something we can look at, and we can’t look at management of the fund as a whole,” Singh explained.
“In its simplest form, if you’ve got a managed investment scheme, they decided to buy CBA rather than the BHP, we can’t look at those decisions.
“How it applies to super funds is the decision to put a fund on your platform is management of the fund as a whole, so it’s excluded from our jurisdiction.”
Anderson said that the FAAA doesn’t expect AFCA to look at specific investment decisions, impacted clients should be able to make a complaint if their trustee has failed in its obligations.
“ASIC have taken action against fund trustees for their failure to do due diligence before putting these funds on their investment menu, and we would feel that they should be entitled to make a complaint,” he said.
“But I appreciate you’re reflecting the rules that they are now, and we’ve openly said we would like to see that part of AFCA rules change.”
Anderson has previously highlighted some of the gaps in AFCA’s jurisdiction, particularly around AFCA Rule C.1.5, which excludes complaints that are “solely about the investment performance of a financial investment, other than a complaint concerning non-disclosure or misrepresentation”, as well as complaints relating to the management of a fund or scheme as a whole.
Singh added: “There are a lot of parties involved in these losses – officers, the lead generators, the fund itself, the research house reflected in some of the action ASIC’s taken, and you don’t always have jurisdiction to deal with that, particularly the lead generators.”
The lead ombudsman also urged any advisers working with affected clients to help them make complaints where applicable.
“I think [advisers] play a critical role in helping people lodge their complaint, helping them understand the loss, and encouraging them to bring their dispute to AFCA so we can at least start it off and look at it and tell them the right entity to bring it against,” Singh said.
“It can be confusing for people to go, ‘That was my adviser, that was the corporate authorised rep, the actual AFCA member is the licensee’. So, working that out is very difficult for some people. That’s another way advisers can help.”
Anderson also encouraged FAAA members to assist clients, even though it could potentially add to the sector’s CSLR bill.
“This is a demonstration of our commitment to the community. You are encouraging people to help them solve what has happened to them, and it’s acknowledged that as part of that, we’re adding to the load that might end up in the CSLR,” he said.
“And I think that our duty to the community, is to help these people … who have been so badly impacted now.”
Ok so I’m an adviser that has had zero to do with Shield or First Guardian. However through our regulatory compliance service provider we highlighted advice provided that was sourced via these lead generators. We could see the issues immediately. We contributed to highlighting the issues to ASIC. However it took over a year for ASIC to act.
Now I’m the one on the hook and the more I identify (doing the regulators work) the more it costs me. Sorry but my good behaviour is disincentivised. So instead I’ll focus my time on advising other new clients so I can earn the money in order to pay the bill for the failure of the regulator and those that I had nothing to do with.
Don’t expect more of my help – when it has already cost me and will only cost me more. Where ‘s the incentive for the regulator to do a better job? the system has created a moral hazard. It’s clear the designers of the CSLR system didn’t complete the ethics course.
When a medicine is approved and prescribed by doctors and then years later it it proven to be harmful, do they go after the doctors or they go after the manufacturers. why it is not the case in finance industry?!
Rob, advisers like us, are sitting ducks for the trigger-happy muppets. That’s why.
Do Doctors put patients into unproven medicine as they are getting massive marketing fees for doing so?
Do Doctors set up fake comparison sites to get clients channelled into their practise for the express reason to sell the unproven medicine to them?
No they don’t so stop defending these cowboys!
Yes the funds failed but so did the advisers that invested the client’s money into them.
So all these advisers who corralled these clients into these funds, all completed the Ethics course…. mmm very interesting.